Neogen Chemicals

Neogen Chemicals reported a 9% year-on-year revenue growth to INR 220 crore in Q3 FY26, with gross profit increasing by 13% and a 150 basis points margin expansion. Despite this top-line strength, EBITDA stood at INR 32 crore and PAT at INR 4 crore, pressured by transient^📎 costs. These costs included ramp-up expenses for Neogen Ionics, elevated operational expenses due to a fire incident, interim toll manufacturing, and higher finance costs from the Dahej plant reconstruction. Management views these as short-term impacts, expecting insurance claim recoveries to balance them in coming quarters.

The company is making significant strides in its battery materials vertical, highlighted by a new joint venture, Neogen Morita New Materials Limited, with Japan's Morita Investment Limited. Neogen holds an 80% majority stake, with Morita investing $20 million for the remaining stake. This JV leverages 30 years of proven Japanese technology for LiPF6 salt production, positioning it as India's only non-FEOC compliant electrolyte salt plant. This alliance is expected to accelerate international customer approvals and production efficiency.

The Pakhajan greenfield project is progressing on schedule, targeting commercial production for electrolytes in H1 FY27 and electrolyte salts in H2 FY27. Plant equipment has arrived, assembly is underway, and trial production is expected shortly. The company has already secured long-term commercial supply approval from a prominent giga-scale Indian manufacturer and received provisional approval for lithium electrolyte salts from multiple global clients, with final site audits expected in Q1 FY27. The entire 30,000 MT capacity at Pakhajan is expected to be tested and ready by end of H1 FY27.

Neogen anticipates receiving approximately INR 550 crore by Q1 FY27 from various sources. This includes INR 60 crore in insurance claims expected this week, INR 150-170 crore for the main stock claim by March 2026, $20 million (approx. INR 160-170 crore) from the Morita JV by Q1 FY27, and INR 150 crore from a preferential issue to the Promoter Group by Q1 FY27. These funds are earmarked for completing capital projects and reducing working capital, providing significant financial flexibility.

The reconstruction of the Dahej plant is rapidly progressing, with commissioning on track for Q1 FY27. The plant is expected to be fully available by the end of June 2026, leading to stable production from Q2 FY27. This transition from interim toll manufacturing to in-house production is projected to improve the company's cost structure. Dahej is also expected to contribute significantly to battery material sales from Q2/Q3 FY27, with the site anticipated to be fully qualified by several customers by June 2026.

Management provided an optimistic outlook on India's battery cell manufacturing capacity, estimating around 12 gigawatt-hours (GWh) of installed capacity by the end of 2026 from players like Ola, Exide, and Waaree Energy. This capacity is projected to grow significantly to 40-50 GWh by the end of 2027, including contributions from Reliance, Amara Raja, and Tata. This robust growth in domestic battery production is expected to drive strong demand for Neogen's battery materials.

The CDMO and advanced intermediates segments demonstrated resilience, performing slightly better than the previous year and maintaining levels despite the unavailability of the Dahej facility. The company expects these segments to be significant growth areas, contributing to an overall revenue run rate of INR 950 crore+ in the next financial year. Customer visits and new orders for these segments are anticipated from March 2026 onwards, indicating a strong pipeline for future growth.